A new vision for Mesoamerica

From Mexico to Panama, eight countries embark
on a road to integration

Believe it or not, the average speed of trucks that
haul freight from one country to another over Central
America’s main highways is only 10 kilometers per
hour.

The problem is not just bad road maintenance,
the absence of paved shoulders, or traffic congestion.
In fact, a recent analysis of Central America’s road
system indicates that these roads are still several
years away from reaching their saturation point.

A
bigger issue–the role of national borders–becomes
painfully apparent to anyone who travels along the
130-kilometer stretch of highway that begins in La
Unión, El Salvador, passes through Honduras, and ends
in Chinandega, Nicaragua. Trucks often take 24 hours
to make this short trip, and up to 60 percent of that
time is spent handling paperwork and other delays
at the two national border crossings.

Because of such
obstacles, the volume of trade within the Central
American countries is far lower than with countries
outside the region. And freight charges in Central
America are generally twice as high as they are in
Europe.

These are the sorts of problems that the Puebla-Panama
Plan (PPP) was created to address. The governments
of the Central American countries and Mexico launched
this initiative to spur the integration and sustainable
development of the Mesoamerican region, which encompasses
the seven countries of the Central American isthmus
plus nine states in southern and southeastern Mexico.
Bigger market for industry.

The plan is designed to
provide this region with the infrastructure, means,
and social programs it needs to overcome its historical
backwardness. Rich in terms of biodiversity and culture,
Mesoamerica stretches over more than one million square
kilometers and has some 65 million inhabitants. Despite
its wealth of natural resources and proximity to major
markets, its extreme poverty index is three times
higher than the Latin American average. The region
is also highly exposed to natural disasters such as
hurricanes, floods, and earthquakes.

When the PPP
was unveiled in Mexico on March 12, President Vicente
Fox explained how closer links with Mexico’s sister
nations in Central America would boost development
in the southern part of his country.

"We believe that,
based on pre-existing bonds and similarities, we can
create a vast chain of development," Fox said. "Southern
and southeastern Mexico have a great wealth of natural
resources, an exceptional endowment of human talent
and, regrettably, unacceptable levels of poverty and
marginalization against which we are hastening to
launch a direct offensive…The sum total of the determination
and talents of Mexico and the Central American nations
will enable us to forge a zone of exchange and cooperation
on the same level as others that have been created
around the world."

A joint effort

The Puebla-Panama
Plan arose out of the shared goals of two separate
initiatives. On the one hand, the new Mexican administration
has resolved to reduce the regional differences between
the country’s more prosperous northern and central
states and the states of the south/southeast. On the
other, the Central American countries had prepared
their own portfolio of regional integration projects
which they presented this year to the international
community at a consultative group meeting in Madrid.

In order to define the actual content of the PPP,
the countries have asked the Economic Commission for
Latin America and the Caribbean (ECLAC), the Central
American Bank for Economic Integration (CABEI) and
the IDB to analyze the links between the Mexican and
Central American initiatives.

When they met in San
Salvador on June 15 to reaffirm their support for
the integration plan, the heads of state of the Mesoamerican
region determined that there were eight major areas,
known as "Mesoamerican initiatives," in which their
governments would be able to work together productively.

The Mesoamerican leaders agreed that
projects included in the PPP project portfolio would
have to be regional in scope and would have to preserve
the environment and respect the local communities
involved.

They also agreed upon an organizational
structure for implementing the plan. Political leadership
for the process was entrusted to presidential delegates,
generally persons of cabinet rank. At the same time,
the Mesoamerican leaders set up a PPP financing committee
made up of the finance ministers of the region and
IDB President Enrique V. Iglesias.

The leaders emphasized
that PPP projects should be extremely practical. At
a recent press conference, Salvadoran President Francisco
Flores summed it up as follows: "Mesoamerica, with
a population of more than 60 million, has an enormous
potential… and this potential can only be realized
through concrete projects that will give it a unified
electricity market, a highway corridor that will provide
a route for the movement of people and goods, educational
and development projects, and projects that will protect
our environment and that will ultimately enable us
all to pass on the benefits of this concept to their
rightful recipients, the poorest people of this region."

Action plan

The Puebla-Panama Plan also offers the
countries of the region a cooperation mechanism for
addressing shared challenges and for channeling support
from the international community (see link to press
release on the right).

One example is the energy integration
initiative, which is aimed at unifying the region’s
electrical power markets and thus attracting more
investment in power generation as a means to reduce
the high cost of electricity. The cornerstone of this
initiative is to be the Electrical Interconnection
System for Central America Project (known by its Spanish
acronym, SIEPAC), whose objective is to link up the
electricity grids of Costa Rica, El Salvador, Guatemala,
Honduras, Nicaragua, and Panama. The idea for this
project can be traced back to studies conducted by
ECLAC nearly 30 years ago. It was not until the past
decade, however, that the countries reached the political
agreements needed to launch SIEPAC, although the final
negotiations may well take several years. Despite
these difficulties, the project has secured backing
from the government of Spain, which has offered $60
million in concessional funding for its implementation.
It has also attracted one of the world’s largest electricity
companies, Endesa S.A., which now holds a stake in
the firm that owns the SIEPAC transmission lines.
Other firms are keeping a close watch on the process
and are refining the details of their own projects.
More investment in power generation would not only
lower the price of electricity in Central America;
it would also increase the reliability of its energy
systems, which is a factor that carries a great deal
of weight with manufacturing industries.

Under the PPP proposal, the SIEPAC project would
be supplemented by the interconnection of the power
grids of the National Electricity Institute of Guatemala
and of the Federal Electricity Commission of Mexico.
Later on, Guatemala and Belize would also be connected.

Clearly defined rules

The Mesoamerican plan
will promote cooperation among the countries and facilitate
trade by setting down clear-cut rules. Energy exchanges,
procedures at border crossings and the smooth flow
of vehicles could all be hampered or prevented altogether
by the absence of such agreements. Their conclusion
will call for a mutual effort on the countries’ part,
with the financial and technical support of the international
community, to certify each other’s procedures and
standardize their regulations. Faster transport for
fresher fruit.

The PPP also encourages cooperation
in other fields in which the Mesoamerican countries
have similar advantages and vulnerabilities. Many
of its initial proposals arose from studies backed
by the IDB, ECLAC, and CABEI to identify economic
and social projects to further integration among the
countries of Central America and among the states
in southern and southeastern Mexico.

Many of the projects
dealing with sustainable development and human development
focus on traditionally marginalized groups, such as
campesinos, indigenous peoples, and Afro-Caribbean
communities. The proposed initiatives will foster
such groups’ participation in projects on environmental
management and the sustainable use of natural resources,
as well as in the promotion of their own local government
institutions.

Projects are also envisioned that will
focus on strengthening the Mesoamerican countries’
legal and regulatory frameworks for environmental
management, upgrading statistical databases on migration,
and creating a regional network of labor-skills trainers,
an especially important field in a region where the
unemployment rate often reaches 50 percent of the
working-age population.

An additional project would focus on controlling
contagious diseases such as HIV/AIDS, which are spreading
at an explosive rate in some of the region’s poorest
areas.

Catastrophe insurance

A project in
the area of natural disaster prevention and mitigation
will upgrade the quality of the meteorological and
hydrological information in this region. This initiative
is particularly important for a region where hurricanes,
flooding, earthquakes, tidal waves, volcanic eruptions,
landslides, forest fires, and drought claim thousands
of victims and cause hundreds of millions of dollars
in economic damage each year.

In order to reduce the
devastating financial effects that natural disasters
have on the participating countries, the PPP will
promote the development of a catastrophe insurance
market to provide coverage for public infrastructure
such as highways, bridges, schools, and hospitals.
It is expected that this insurance could reduce the
need to raise funds for reconstruction, and the premiums
may act as an incentive for builders to construct
public works more resistant to natural disasters.

Support will also be provided to organize public
campaigns to promote measures for reducing the region’s
vulnerability to natural hazards. This is particularly
important because such disasters usually wreak the
greatest havoc among the poor, and their destructive
power is often heightened by man’s actions. For example,
people build in high-risk areas and remove forest
cover, encouraging disasters from flooding and landslides.

Potential for progress

The PPP initiatives
seek to translate the integration aspirations of the
Mesoamerican region–where good intentions have often
been confined to words rather than deeds–into concrete
action.

This objective is combined with a healthy
dose of fiscal realism. The participating countries
are aware of their budgetary constraints and want
to conserve scarce resources for high-impact poverty-reduction
programs in such social sectors as education and health.
Consequently, infrastructure will be financed with
private funds whenever possible.

An example is the
telecommunications development initiative, which is
aimed at upgrading the region’s informatics infrastructure
by installing a fiber optics network in the region.
This would have to be a private-sector undertaking
in which the participating states would act as regulators
only.

In the case of the roadway integration initiative,
an effort will be made to hold down costs by starting
out with improvements to the existing infrastructure
in order to facilitate the movement of merchandise
and people. This proposal focuses on connecting and
rehabilitating the roads making up the Puebla-Panama
corridor, most of which follow the route of the Pan-American
Highway. In addition, the Atlantic corridor and some
of the routes connecting the two coasts will be refurbished.

The PPP also seeks to open up economic opportunities
in areas where few now exist. It is hoped that the
tourism initiative will encourage investment in projects
in which local and especially indigenous and Afro-Caribbean
communities are actively involved. This type of tourism,
which has a low environmental impact, would help to
generate foreign exchange, jobs, and business for
micro- and small-scale entrepreneurs in locations
that are not included in the usual tourist itineraries.
One possible option might be based on what is known
as the "Botswana model," where an international hotel
company joins with a local community to develop a
tourism project that respects the host community’s
ethnic and cultural traditions.

One of the key aspects
of the Mesoamerican plan will be its information,
consultation, and grassroots participation program.
This initiative is designed to build upon the local
and national dialogues held in a number of the countries
in the region to agree upon development projects.
Both the participating countries and the international
community feel that this initiative will be essential
in ensuring that the PPP lasts over time and can continue
to incorporate new initiatives for the common good.

In a recent meeting in Washington with the finance
ministers of the Mesoamerican countries and the PPP
committee members, the President of the IDB underscored
the plan’s significance under current world conditions.
"We are talking about a vast political initiative
to turn Mesoamerica into an area of economic and social
cooperation where major presidential agreements will
be translated into concrete projects to help the region
meet the challenge of globalization," said Iglesias.